The Startup India Project is an ambitious flagship initiative of the Government of India under our Prime Minister, Shri Narendra Modi. The whole purpose of this initiative is to empower startups and build a robust ecosystem by nurturing them to grow through innovation and design. This will, in turn, drive sustainable economic growth and bring in large-scale employment opportunities within the country.

“I see startups, technology, and innovation as exciting and effective instruments for India’s transformation.”
– Shri Narendra Modi, Prime Minister Of India

The project was first introduced by the prime minister on the 15th August 2015 while he was addressing the nation through his speech on the occasion of India’s 69th Independence Day.

The Startup India Project – Action Plan

On 16th January 2016, the Government of India introduced the ‘Action Plan’ to meet the objectives of the ‘Startup India’ initiative. The Government hopes to accelerate the process of spreading the Startup India movement through this Action Plan.

The Action Plan revolves around the following three broad areas:

1) Simplification and Handholding

Simplification and Handholding are further divided into the following six aspects along with its objectives:

2) Funding Support and Incentives

This section was further divided into five subsections:

3) Industry-Academia Partnership and Incubation

It was further divided into the following eight points:

Here’s How Your Startup Could Be A Part Of the Startup India Project

As per the latest notification issued by the Ministry of Commerce and Industry on 23rd May 2017, the definition of Startup is as follows –

An entity shall be considered as a Startup only if:

a) The Startup incorporated/registered in India must be an entity as a Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008) and

b) up to seven years from the date of its incorporation/ registration; however, in the case of Startups in the biotechnology sector, the period shall be up to ten years from the date of its incorporation/ registration; and

c) if its turnover for any of the financial years since incorporation/ registration has not exceeded Rupees 25 crores; and

d) if it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.

 

Process of recognition for a Startup

Apart from the definition above, the procedure for being recognized as a Startup has also been revised. The process of recognition as a ‘Startup’ shall be through an online application made over the mobile app/ portal set up by the Department of Industrial Policy and Promotion.

Entities will be required to submit the online application along with the Certificate of Incorporation/ Registration and other relevant details as may be sought.

Startups also have to submit a write-up about the nature of business highlighting how is it working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.

Procedure for obtaining Tax Benefits for a Startup

The notification further added that in order to obtain the tax benefits, a Startup should fulfill the following conditions:

– The Startup incorporated/registered in India must be an entity as a Private Limited Company (under The Companies Act, 2013) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008) and which is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019.

– The Startup needs to be working towards innovation, development or improvement of products or processes or services, or should be a scalable business model with a high potential of employment generation or wealth creation.

– It should obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification as constituted by Department of Industrial Policy and Promotion from time to time.

NOTE : The Startup would NOT be eligible for tax benefits if it is found to be involved in the mere act of developing:

1) products or services or processes which do not have the potential for commercialization, or

2) undifferentiated products or services or processes, or

3) products or services or processes with no or limited incremental value for customers or workflow

Lastly, the DIPP reserves the right to revoke the recognition certificate and certificate of an eligible business for tax benefits if it finds that the Startup recognition is found to have been obtained without uploading the relevant documents or on the basis of false information.

 

The Action plan might be too complex to understand. In case you have questions or need help to get onboard the Startup India plan, talk to our specialists at IntegraBooks.

The most frequent problems that business owners face are to do with accounting & regulatory compliance. Entrepreneurs view time invested in doing both as unproductive time.

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